Before even meeting at the White House in Washington on Wednesday 25 July to try and find common ground on transatlantic trade and international imbalances, US President Donald Trump and European Commission President Jean-Claude Juncker were circumspect as to the outcome of their meeting, which could be decisive for avoiding a trade war.
"We will make it clear that we are not the USA's enemy. We have a common past that we must not forget. (But) I am not excessively optimistic", Juncker commented on German television channel ZDF, before his trip, on Tuesday 24 July.
Giving assurances that he knew "how to handle" Trump, Juncker confirmed that he wanted "to avoid a trade war" but also show Trump that the EU would not let itself be walked over. "If the USA adopts customs duties on automobiles, the EU will have to take retaliatory measures. We are able to respond adequately and immediately", he added.
At the time of EUROPE going to press, Juncker was trying to convince Trump to give up customs duties on car imports. Trump has been threatening to impose these duties since the establishment of EU counter measures, in early July, to respond to the US raising tariffs targeting steel and aluminium imports. At the time of going to press, Juncker was also trying to convince Trump to consider a 'positive agenda' to improve the transatlantic trade climate.
Counter measures of $20 billion envisaged by EU in face of tariffs on cars
On Wednesday, Swedish daily newspaper Dagens Nyheter was reporting that European Trade Commissioner Cecilia Malmström, who was accompanying Juncker to visit Trump, had warned that the Commission was preparing counter measures targeting $20 billion (€17 billion) of US products in response to the USA possibly raising tariffs against imports of EU cars. The counter measures could involve agricultural, mechanical and high technology products.
Malmström seemed circumspect about the outcome of the meeting in Washington, admitting: "I'm an optimistic person, but going to the USA, I am moderately so. We can always try".
Juncker's visit to Washington aims "to maintain the dialogue" and "take the drama out of the situation", but not to negotiate, his spokesperson Margaritis Schinas stated on Monday 23 July, saying that Juncker would not be bearing "any offer".
Juncker will be the apostle of a European approach in which the objective is to explore the options for a de-escalation of tension by building on the four-point plan agreed by the European leaders on 17 May. This plan includes talks on tariff liberalisation for industrial products (including cars), as well as talks on opening up public procurement, on voluntary regulatory cooperation, increased cooperation on energy and LNG, and on reform of the WTO (see EUROPE 12022).
Discussions on this 'positive agenda' to improve the transatlantic business climate nevertheless remain conditional on the US removing its taxes on imports of steel and aluminium that were imposed on European producers on 1 June.
Donald Trump wants agreement on removing tariffs, barriers and subsidies...
"It is quite possible that Trump will have something to propose", Juncker said before he set off, on Tuesday evening.
"The European Union is coming to Washington tomorrow to negotiate a deal on trade. I have an idea for them. Both the US and the EU drop all tariffs, barriers and subsidies! That would finally be called free market and fair trade! Hope they do it, we are ready – but they won’t!", Trump tweeted.
The EU and US negotiated a vast free trade agreement, TTIP, between 2013 and the end of 2016. These negotiations have been on ice since the end of 2016 and Trump's election, and the Europeans no longer consider TTIP negotiations on the agenda (see EUROPE 12026).
On the sidelines of the G20 finance ministers' meeting in Buenos Aires, US Treasury Secretary Steven Mnuchin spoke of the idea, on Sunday 22 July, of a plurilateral free trade agreement between the G7 economies (the countries of the European Union, Canada, the USA and Japan) aiming to liberalise tariffs on industrial and agricultural products and to remove subsidies (see EUROPE 12069).
... and supports customs duties as a tool for obtaining fairer trade
"Every time I see a weak politician asking to stop trade talks or the use of tariffs to counter unfair tariffs, I wonder, what can they be thinking? Are we just going to continue and let our farmers and country get ripped off? Lost $817 billion on trade last year. No weakness!", Trump also said on Wednesday morning, in a message aiming to justify, at national level, his protectionist trade strategy.
The Trump administration's announcement on Tuesday that it would disburse up to $12 billion (€10.3 billion) to help US farmers overcome the effects of the trade war that the US is serving up to China and the EU, illustrates the US president's determination to use customs duties as a trade negotiation weapon.
After the USA and China mutually inflicted customs duties on $34 billion of their respective imports on 1 July, Trump is now threatening to apply new customs duties targeting over $500 billion of imports from China, in other words the total value of Chinese imports into the US in 2017.
With the approach of mid-term elections in November, Trump wants to be assured of support from US farmers and rural states, which formed a large base of his electorate in 2016.
"Farmers will be the biggest beneficiaries" of the US customs duties, Trump said at an event organised in Kansas City, Missouri.
Exports of agricultural products form a large part of US exports – up to $138 billion (€118 billion) in 2017. (Original version in French by Emmanuel Hagry)